Trust accounts representing more than KES 140 Billion in assets under administration

The Scale of Trust Administration in Kenya

Growth in this space has been driven by three converging trends: an increase in structured M&A transactions that rely on escrow to bridge valuation and warranty risk, expanding pension and collective investment scheme assets that require independent custodial trustees, and larger infrastructure and real estate developments that use security trusts to hold collateral for syndicated lenders.

Each of these arrangements places a corporate trustee, often a bank trust department or a licensed corporate trustee, in a fiduciary position with statutory duties that go well beyond the commercial terms negotiated between the underlying parties.

Fiduciary Duties Under the Trustee Act and Sector Regulation

A trustee's core obligations, the duty of loyalty, the duty to act with reasonable skill and care, the duty to keep trust property separate from its own assets, and the duty to account, apply regardless of whether the arrangement is a simple escrow or a complex multi-lender security trust. Where the trustee is also a regulated financial institution, those common law and statutory trustee duties sit alongside sector-specific obligations, for example from the Capital Markets Authority for schemes holding investor funds, or the Central Bank of Kenya for banks acting as security trustees on syndicated facilities.

Breach of any of these duties, even where no loss ultimately results, can expose a corporate trustee to removal, an account of profits, or damages, and increasingly to reputational consequences that outlast the underlying transaction.

Escrow and Trust Governance Best Practice for Corporates

Parties negotiating an escrow or security trust arrangement should treat the trust instrument itself as a primary transaction document, not boilerplate. Release conditions, dispute-resolution mechanics for disputed releases, trustee liability caps, and reporting cadence to beneficiaries all deserve the same negotiation attention as the commercial terms of the underlying deal.